Appeals panel sides with tax board on Dodge City casino

A Kansas Court of Appeals panel has ruled a Dodge City casino does not have to pay the state's "use tax" on electronic gambling machines it operates for the Kansas Lottery.

The three-judge appeals panel agreed Thursday with a state Board of Tax Appeals decision that said the Kansas Department of Revenue was wrong in collecting $801,588 in compensating use tax from the Boot Hill Casino and Resort in Dodge City, The Topeka Capital-Journal reported.

The tax was from the casino's purchase of out-of-state vendors' electronic gambling machines on behalf of the Kansas Lottery, the state agency that oversees operations at three state-owned casinos, including the one in Dodge City. The casino paid the tax under protest before it started the appeals process to have the money refunded.

The Board of Tax Appeals ruled earlier that Boot Hill manages but does not own the equipment for the Kansas Lottery, which is required to own and operate all gambling equipment used in the state. The board said the casino doesn't have to pay the use tax if it doesn't own the equipment.

The Department of Revenue acknowledged to the tax appeals board that the Kansas Lottery was the owner of the machines. But it argued that Boot Hill still had to pay the use tax because it was "contractually allowed to exercise rights that allow it to use and enjoy the

property."

The Court of Appeals panel agreed with the tax board however, citing purchase agreements Boot Hill signed as "manager under contract to the Kansas Lottery on behalf of the State of Kansas." It also cited provisions of the state's gambling regulations that say no state-owned casino can purchase or lease any gambling device except on behalf of the Kansas Lottery.

The appeals court also noted that Kansas' three state-owned casinos the other two in Mulvane and Kansas City, Kansas provide the Kansas Lottery with 100 per cent of all gross gambling proceeds daily. The Kansas Lottery returns 73 per cent of that revenue to each casino on a monthly basis.